The Coca-Cola Company has said it will take a US$9m pretax charge following an investigation into alleged fraud at the company’s food services division.
The company will also be cooperating with the Securities and Exchange Commission, which requested that documents related to the allegations of widespread marketing and accounting fraud be released to it.
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The investigation began as a result of allegations made by a former Coke employee Matthew Whitely. Whitely was once the director of finance for supply management at the company’s US fountain unit, now called the food services division. However, he was laid off following a restructuring.
He subsequently filled a lawsuit accusing Coke of fraudulent marketing and accounting practices at the fountain division, demanding US$44.4m in compensation for wrongful dismissal.
Coke called Whitley a “disgruntled” ex-employee.
In a statement Coca-Cola said an investigation by accounting firm Deloitte & Touche and an independent law firm discovered no evidence to support many of Whitley’s claims of fraud in its food services unit.
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By GlobalDataHowever, the company did admit that it discovered that Coca-Cola had overestimated by several million dollars the carrying value of frozen uncarbonated drink machines used in a promotional program with fastfood chain Burger King.
On top of this Coke said that some workers involved in a Burger King-related frozen drinks promotion in Richmond, Virginia had “improperly influenced” the results of that test. The employees had been disciplined in 2001 for tainting results.
Burger King said it was conducting its own review of the matter. “We are very disappointed in the actions of the Coca-Cola Company,” Burger King chief executive Officer Brad Blum said in a statement released to the media.
“We expect and demand the highest standards of conduct and integrity in all our vendor relationships and will not tolerate any deviation from these standards,” Blum said.
Coca-Cola president and chief operating officer Steve Heyer has apologised to Burger King.
